The National Association of Manufacturers reportes that the U.S. Court of Appeals for the D.C. Circuit yesterday once again ruled in favor of their challenge to the SEC's conflict mineral disclosure requirement relating to certain products from the Democratic Republic of the Congo (DRC) and surrounding countries. The compelled disclosure requirement that products are "DRC conflict free" or not conflict free violates the First Amendment's guarantee against government compelled speech.
The 3-judge panel finally ruled 2-1 that the looser standard of review under the Zauderer case does not apply here, because that case involved only voluntary commercial advertising, not government-compelled statements about products. But even if this looser standard of review applied, the government must have a sufficient interest in mandating disclosures, and the rule must be effective in achieving its objectives. Instead, whether the law will decrease the revenue of armed groups in the DRC and diminish the humanitarian crisis there "is entirely unproven and rests on pure speculation." No hearings were held on the impact of the law prior to enactment, and later hearings were inconclusive. This is an insufficient justification to compel speech under the First Amendment.
The majority also analyzed the part of the ruling in last year’s American Meat Institute case and found that determining whether compelled speech is about "purely factual and uncontroversial information" is a puzzling exercise, but that the SEC's requirement to label products as "conflict free" or not is hardly factual and non-ideological. Instead, it ethically taints products and stigmatizes companies in violation of the First Amendment.
The suit was brought by the NAM, the U.S. Chamber of Commerce and the Business Roundtable in 2012. The government has 90 days to appeal to the Supreme Court, or may petition for rehearing before the entire set of judges in the D.C. Circuit.
In a statement released today, the NAM said, “We believe it is unreasonable to require companies to continue to spend substantial resources implementing the SEC’s rule when its central feature has been invalidated on constitutional grounds. Therefore, we believe the SEC and Congress should reexamine this approach of the Dodd-Frank Act and rule in light of the court’s decision.”